B2B: What it means, how it works, and real-world examples

Published Thursday 11 September 2025

Table of contents

• Business-to-business definition
• Why B2B matters: key benefits
• How the B2B model works
• Types of B2B businesses
• Examples of B2B companies and industries
• B2B vs B2C: what's the difference?
• Managing your B2B relationships
• FAQs on B2B

Key takeaways

• Leverage B2B partnerships to reduce operational costs by 20-40% through shared resources, bulk purchasing power, and outsourcing specialised functions to expert providers.
• Focus on building long-term relationships with multiple decision-makers in B2B sales, as these transactions typically involve 3-12 month sales cycles requiring demonstrations, negotiations, and ongoing account management.
• Implement structured B2B transaction processes that include initial contact, negotiation, implementation, payment terms, and ongoing support to reduce risk and build successful partnerships.
• Utilise B2B relationships to enhance scalability and innovation by accessing new technologies, industry insights, and automated solutions that help you focus on core business operations.

Business-to-business definition

B2B (business-to-business) refers to companies selling products or services to other businesses, not individual consumers.

These partnerships help you specialise in your core strengths while outsourcing other functions to experts. This creates efficiency and cost savings for your business.

For example, Xero accounting software helps you manage your finances more efficiently and gives you more time to focus on your core operations.

Why B2B matters: key benefits

B2B relationships help you reduce operational costs, increase efficiency, and grow your business faster. Here’s how you can benefit from these partnerships:

Increase efficiency and productivity

B2B partnerships help you automate manual tasks and centralise business processes. Research shows that your business performance improves when you set and achieve clear efficiency targets.

Key benefits:

• Reduce manual workload by automating routine tasks
• Improve collaboration with centralised systems that connect your teams
• Make faster decisions with real-time data access

Example: Project management software centralises task tracking, file sharing, and team communication in one platform, reducing email chains and missed deadlines.

Learn more about improving efficiency

Lower costs and boost profits

B2B partnerships reduce costs through shared resources and bulk purchasing power, often cutting expenses by 20–40%.

Cost-saving strategies:

• Rent equipment to access expensive machinery without large capital investment
• Share services to split costs for specialised expertise
• Buy in volume to get better pricing through combined purchasing power

For example, a construction firm rents excavators for £500 per week instead of purchasing for £50,000, saving capital and maintenance costs.

Enhance scalability and growth

B2B partnerships help you scale efficiently by outsourcing specialised functions to businesses with more expertise.

For example, an eCommerce store uses a fulfilment centre to handle surges in orders without expanding its warehouse.

Drive Innovation and competitive advantage

B2B collaborations help you innovate by giving you access to new technologies, industry insights, and emerging trends. For example, software as a service (SaaS) companies release regular updates, so you always have the latest tools without upfront investment.

Learn how your small business can compete with large retailers

Build stronger business relationships

Long-term partnerships create mutual value and trust – according to McKinsey, 44% of B2B businesses emphasise relationships as a reason for their sustainable growth.

For example, a software as a service (SaaS) company offering white-labelled software trains its partner’s sales team, strengthening both companies’ market positions.

How the B2B model works

In a B2B model, you trade goods, services, or knowledge with other businesses to support your operations and growth.

Transactions in a B2B model

B2B transactions usually follow a structured five-step process to help you reduce risk and build successful partnerships:

1. Initial contact: Business identifies needs and contacts potential suppliers

• Example: Restaurant chain seeks catering equipment supplier

2. Negotiation: Parties agree on pricing, terms, and service levels

• Example: Negotiate volume discounts and delivery schedules

3. Implementation: Products or services are delivered as specified

• Example: Equipment installed and staff trained on usage

4. Payment: Invoices processed according to agreed terms

• Example: Net 30-day payment terms with early payment discounts

5. Ongoing support: Continuous service, updates, and relationship management

• Example: Regular maintenance, software updates, and account reviews

Types of B2B businesses

B2B isn't a single model but a range of business types that support each other. Understanding them can help you see where your business fits in. Common categories include:

• Produce products that other businesses use as components, for example, a company that makes microchips for computer manufacturers
• Resell finished goods to other businesses, such as wholesalers who buy in bulk and sell to retailers
• Provide professional services to other businesses, such as accounting software, marketing, or consulting
• Supply goods and services to government agencies and institutions, such as schools or hospitals

Examples of B2B companies and industries

B2B companies operate across every industry, providing essential services, products, and technology to other businesses. Here are the main categories:

• Source raw materials, components, and equipment from other suppliers to create finished products (manufacturing and distribution companies)
• Provide cloud computing infrastructure, development tools, cybersecurity, and software as a service (SaaS) tools to simplify your business processes (software and tech businesses such as Xero and Hubspot)
• Offer business consulting, payment processing, risk management, and financial analysis (financial services firms such as Bank of America, Stripe, and Accenture)
• Collaborate on patient referrals, share health data, and buy specialised equipment (healthcare organisations)
• Partner with technology providers and publishers to create learning resources and online platforms (education sector)

More B2B transactions are moving online, with 71% of businesses now offering eCommerce and online sales accounting for 34% of revenue. Digital platforms help you automate orders, simplify procurement, and improve efficiency.

B2B vs B2C: what's the difference?

B2B (business-to-business) companies sell to other businesses, while B2C (business-to-consumer) companies sell directly to individual customers. Understanding these differences helps you choose the right business model.

B2B vs B2C: key differences

While B2B serves other businesses, business-to-consumer (B2C) businesses sell products and services directly to individuals as the end consumers. Apple, Ikea, Alibaba, Sony, and Netflix are all B2C businesses.

Key differences between B2B and B2C:

Sales process:

• B2B: Longer sales cycles (3-12 months) with multiple decision-makers
• B2C: Quick purchases (minutes to days) with individual buyers

Customer relationships:

• B2B: Long-term partnerships with dedicated account management
• B2C: Brand loyalty through marketing and emotional connection

Purchase motivation:

• B2B: ROI, efficiency, and business outcomes drive decisions
• B2C: Personal preferences, emotions, and price influence choices

Here’s how B2B and B2C transactions differ in practice.

• B2B: Xero accounting software gives your business specialised features like payroll management and financial reporting. You can access demonstrations, free trials, and ongoing support to meet your specific business needs.
• B2C: Mint is a personal budgeting app that helps you track your spending. It focuses on usability, immediate value, and lifestyle benefits.

B2B vs B2C in practice

Here's how B2B and B2C transactions differ in practice:

• B2B: Xero provides accounting software to businesses with specialised features like payroll management. The sales process includes demos, free trials, and ongoing support.
• B2C: Mint offers personal budgeting tools with a focus on simplicity and lifestyle benefits, not business outcomes.

Challenges of B2B transactions

B2B transactions present unique challenges that can slow growth and increase costs. Understanding these obstacles helps you prepare better strategies:

B2B sales typically involve multiple decision-makers – so there are plenty of approvals, negotiations, and technical evaluations needed, leading to extended timelines.

For example, selling software to large enterprises means talking to – and managing relationships with – IT directors, department heads, and finance officers, who each have different priorities.

When you buy in bulk or choose different service levels, you often get volume discounts and performance-based clauses.

For example, negotiating prices can be complex, so you may need specialised expertise to get the best deal.

Managing your B2B relationships

Managing B2B relationships effectively drives long-term business success through improved efficiency, trust, and mutual growth.

Key relationship management strategies:

• Clear communication: Regular check-ins and transparent reporting
• Reliable processes: Consistent delivery and payment schedules
• Technology integration: Automated invoicing and seamless data sharing
• Performance tracking: Monitor metrics and address issues quickly

Xero accounting software helps you strengthen your business relationships by automating invoicing, streamlining payments, and providing real-time financial visibility to build trust with your B2B partners.

Learn more about how Xero can help your business

FAQs on B2B

Here are answers to a few common questions about business-to-business relationships.

What is the best payroll software in Australia?

The best software depends on your business needs. Look for a solution that is Single Touch Payroll (STP) compliant, easy to use, and integrates with your accounting system. Features like automated superannuation payments and employee self-service are also valuable. Choose software that can grow with your business.

Can I do my own payroll in Australia?

Yes, you can manage your own payroll. Compliant payroll software makes the process simpler and helps you meet your tax and superannuation obligations.

How much does payroll software cost?

Most payroll software uses a monthly subscription. The price depends on your number of employees. Consider the time you save and the cost of errors or fines if you do payroll manually.